When it comes to creating and running a business, managing finances is one of the most important aspects of success. It may not be exciting, and for some, it can be stressful, but entrepreneurs must understand how to plan for and manage their business finances for long-term success.
The following mistakes are those that are commonly made, but can be avoided:
Spending too much in the beginning
It can be easy to get carried away in the early stages of starting a business. It’s an exciting time to take your plans from on-paper to reality. However, you want to keep yourself from overspending on unnecessary, extra expenses at the beginning, such as expensive office furniture, company cars, or other purchases that can be made later on. The more financial strain you put on your business by overspending in the beginning stages, the more pressure you will ultimately put on yourself later in your business journey.
Not sticking to a budget
Not establishing and sticking to a budget goes hand-in-hand with the previous mistake; you will end up spending too much. Budgeting is one of the most important skills that an entrepreneur can have, and while it may not come naturally to some, it can be learned. It’s essential to stay disciplined and only focus on expenses that are the most important to your business. Make a plan, define which expenses are necessary and why, and stick to them.
Mixing personal and business finances
It’s also important for entrepreneurs to keep their personal finances separate from their business. Your business should be a separate entity, and you are solely responsible for managing these finances. It’s also easier to keep these two factors separate when it comes to accounting and budgeting your books. In order to truly determine your actual business profits and losses, keep your business finances far away from your own. You’ll thank yourself later!
While it may be tempting to just take out that extra loan for good measure, if it’s not necessary, then you are actually setting yourself and your business up for failure in the long run. Debt involves the highest amount of risk because regardless of what happens with your business, you have to pay it back. Be cautious when it comes to loans in the beginning stages of your business, and avoid personal debts as much as you can.
Not planning for taxes
Not planning ahead and accounting for taxes is a major mistake that too many entrepreneurs end up making. This is often because individuals are used to taxes already being withheld from an employer with each paycheck, but this isn’t the case with a small business; you’re responsible for making sure you can make your estimated tax payments each quarter. This will allow you to avoid having to pay a huge bill for the tax deadline the following year.
Shorting Yourself on Compensation
With all that goes into starting and running your own business, oftentimes, entrepreneurs forget to include their own financial needs. You may want to keep every penny possible within your business and its needs, but you deserve to pay yourself your earned salary as well! If you are under personal financial stress, then you could end up hurting your ability to run your business effectively.
Not having an Emergency Fund
This is perhaps one of the biggest mistakes that you can make as an entrepreneur. You should always have a backup plan because no matter how well you stick to your business plans, something can always go wrong. Regardless, it never hurts to be prepared and have an emergency fund to fall back on in case times get tough. If you haven’t already, start by setting up a business savings account and regularly putting a small percentage of your savings there.
About Kye Giscombe
Outstanding management skills, an innovative mind, and an entrepreneurial spirit have propelled Kye Giscombe to top positions in a variety of business sectors, including law, real estate, construction, fitness, and retail manufacturing and operations. His career reflects nearly 20 years of executive-level management, marketing, business analysis, and investing experience, serving as a key decision-maker in existing corporate, start-up, entrepreneurial, and expansion environments.
Among the several successful companies he created over the past two decades are Cosmo Horizon Inc., a commercial construction management firm, and Contact Sports NYC, a sports apparel manufacturer. Giscombe attributes Contact Sports NYC’s success to collaboration with colleagues Frank Drohan and Irving Brothman, a top executive at Burlington Coat Factory.
Giscombe attributes his business success to his ability to analyze the viability of project ideas, design products and services that appeal to new growth niches, develop creative strategies to achieve goals, and implement processes that produce significant profitability and a loyal customer base. He relishes the challenge of creating new entrepreneurial enterprises and finds inspiration in planning projects he’s passionate about.
A resident of Alpharetta, Georgia, Kye Giscombe enjoys motorcycles, tennis, working out, reading, and traveling when he’s not concentrating on business.